ITR Filing AY 24-25: Income tax deductions refer to specific expenses or allowances that taxpayers can utilise to decrease their taxable income, thereby diminishing their overall tax liability. These deductions are outlined in various sections of the Income Tax Act, and eligibility depends on taxpayers’ circumstances and the nature of their expenses.
Deduction Under New Tax Regime vs Old Tax Regime
In filing income tax returns, deductions represent expenses eligible for reducing taxable income. Various types of deductions are available, necessitating the retention of expense evidence. The tax department may request this proof for clarification if needed, including receipts, invoices, or other documentation. However, during the filing process, it’s not mandatory to submit/upload these documents.
Also Read: Income Tax Refund Made Easy: Step-By-Step Guide To Check Your Tax Refund Status Online
Exemption Not Allowed In New Tax Regime
In the new tax regime, individuals cannot claim several exemptions and deductions.
These include Standard Deductions under Section 80TTA and Section 80TTB, and various deductions under Section 80C, 80D, 80E, 80CCC, 80CCD, 80DD, 80DDB, 80EE, 80EEA, and 80G of Chapter VI-A of IT Act.
Additionally, allowances like professional tax, entertainment allowance, house rent allowance (HRA), leave travel allowance (LTA), and child education allowance are not eligible for deductions.
Contributions to NPS accounts, donations to political parties or trusts, and interest on self-occupied or vacant property loans are also excluded.
For businesses, there are several deductions, which are not available under the new tax regime. These include additional depreciation, investment allowance, sector-wise deductions, expenditure on research & development, expenses on capital expansion, and exemptions for units in SEZ.
Also Read: Which ITR Form To File For AY 2024-25? Income Tax Return Forms Decoded, Check Details Here
Exemption Allowed In New Tax Regime
However, the new tax regime does offer certain exemptions and deductions.
These include transport allowances for persons with disabilities (PwD), conveyance allowance, travel/tour/transfer compensation, and perquisites for official purposes.
Contribution to Agniveer Corpus Fund (Section 80CCH): This is a deduction introduced for contributions made to the Agniveer Corpus Fund, which is applicable in both regimes.
Standard Deduction of Rs. 50,000: This is a fixed deduction you can claim irrespective of your actual expenditure.
Additionally, exemptions for the voluntary retirement scheme, gratuity amount, leave encashment, interest on home loan for lent-out property, gifts up to Rs. 5,000, and employer’s contributions to employees’ NPS accounts can still be claimed.
New Tax Regime vs Old Tax Regime; Which Is Better?
A comparison between the deductions available under the old and new tax regimes for FY 2023-24 shows that the new regime does not allow deductions for employment/professional tax, house rent allowance (HRA), and exemptions for free food & beverages through vouchers/food coupons.
Additionally, deductions for investments under Section 80C, 80CCC, 80CCD, 80DD, 80DDB, 80E, 80EE, 80EEA, and 80G, as well as medical insurance premium and interest on home loan for self-occupied/vacant property, are not available in the new tax regime.
Experts say that taxpayers must carefully evaluate their financial goals and circumstances to choose between the old and new tax regimes. The new regime offers lower tax rates but limits deductions and exemptions, while the old regime has higher tax rates but provides various deductions and exemptions.
Selecting the appropriate tax regime can significantly impact an individual’s tax liability and financial planning.
Moreover, the amount of deduction you can claim is limited to the maximum amount specified for each deduction. You can only claim deductions for expenses that you have incurred. One must have the necessary documentation to support your claims and claim deductions in the correct year.
If you are unsure about whether you can claim a deduction or how to claim it, you should consult with a tax advisor.
ITR Filing Last Date 2024
The last date to file all income tax returns except ITR-6 for the assessment year 2024-25 (FY 2023-24) without a late fee is July 31, 2024.
